Dan Ariely

My next book is almost ready and I would like to thank everyone for your wonderful suggestions and feedback on the name.

And the winner is:   The (Honest) Truth About Dishonesty, How We Lie to Everyone–Especially Ourselves.

The publication date is June 5th — more info to follow

Call for Artists to respond to research on inequality

Hosted by Dan Ariely and the Center for Advanced Hindsight

Artists from around the world are invited to attend a discussion on social and economic inequality (from the lab that hosted the “Creative Dishonesty” project), on Wednesday, February 22^nd at 7 PM EST.  (Artists who do not live within driving distance of Durham, NC will watch the forum streaming live online.)

Interested artists are to RSVP to the curator, Catherine Howard, at creativedishonesty@gmail.com by Tuesday, February 21st at 9 PM.

After the forum, artists interested in creating artwork in response to the research will complete an online application, including a 1-page explanation of the artist’s creative process and 2-3 digital images of past work.  To be considered, applications must be submitted by Monday, February 27^th at 9 PM.

Artists will be notified if they are selected to participate by February 29^th and will receive a $100 stipend to complete their piece.  There is no limitation to the style or media of pieces created for “PoorQuality,” but all work must be completed by May 5^th. 

Artwork created for “PoorQuality” will be on display at the Center for Advanced Hindsight from June 1^st to August 31^st with a reception on June 22^nd.  An exhibit catalog, including responses and reflections by the artists and the researchers, will be published.  Each artist will receive a copy.

Artists will retain all rights to their piece. Works will be returned to artists after the exhibit by September 15^th, 2012.  If the piece is purchased, the $100 stipend will be deducted from the purchase price.

Important Deadlines

Feb 22, 7 PM – “PoorQuality: Inequality” forum at the Center for Advanced Hindsight

Feb 27, 9 PM – Deadline to apply for participation

Feb 29, 9 AM – Selected artists will be notified

May 5, 9 PM – Drop-off deadline

Jun 22, 6 PM – 10 PM – Opening reception at the Center for Advanced Hindsight

For more information about the “PoorQuality” project, contact curator Catherine Howard at creativedishonesty@gmail.com

Jared Wolfe, one of the students working with me, took the following pictures at Whole Foods a few days ago.  They illustrate amazing creativity in defining what the term “a deal” means.

1) Regular price is $1.99 and the Sale price is?   Two of the same item for $5 — which according to Whole Foods’ quick calculation is a savings of $1.02.  Amazing.

2) Regular price is $3.99 and the Sale price is?  $3.99 — thankfully this time they did not add any amount to the savings.

What I am wondering is how many people just look for the orange tags and the Sale signs without even looking at the details.  I suspect that this is very common, particularly in a busy and hectic grocery store and particularly when we buy many items that each of them by itself is not very expensive.

I got this picture this week. What is interesting about this price menu is that the “Fuel and Service,” priced at $9.29, is so off the scale (and so outrageous) that perhaps it makes the pre-paid option of $3.65 look attractive.  After all it is about 1/3 the price of the Fuel and Service.

I came across a funny cartoon the other day that captures an interesting aspect of our purchasing behavior. We are perfectly willing to spend $4 on coffee (for some of us this is a daily purchase), or $500 on devices that you can argue we don’t really need. However, when it comes to buying digital items, such as apps, most of which are priced at $1, we suddenly get really cheap. Why?

http://theoatmeal.com/blog/apps

Here are some reasons. The first is that we are anchored by the price of categories, so when we think about lattes, we compare only across beverages. When we think about apps, we only compare across digital downloads. Thus, when we think about buying a $1 app, it doesn’t occur to us to ask ourselves what the pleasure that we are likely to get from this $1 app — or even what is the relative pleasure that we are likely to get from this app compared with a $4 latte. In our minds, those two decisions are separate.

So now the question becomes, why is the price anchor for apps so low? I think the answer to this is that we have been trained with the expectation that apps should be free. Having lots of free apps on the App Store is clearly advantageous for Apple, because it makes their devices more attractive.  However, because FREE! is such a special, exciting price level, it makes the thought of paying even $1 for an app into an agonizing decision.

I think this could have been avoided. Imagine if instead of offering free apps on day one, Apple instead created a really low minimum price–say $0.15. Lots of people would still go for Apps at this price, but instead of being anchored to the idea that apps should be free, we would be anchored to the idea that apps should cost something. Then paying more (maybe even $2) for an app would be a simpler step, maybe one that we could take as easily as paying $4 for a latte.

One of my long time friends just wrote me earlier today.  Not seeing her for a long time I was looking forward to seeing her, and I invited her to join us for dinner on Friday night.

She was very happy to accept the invitation, and asked what she could bring.  I asked her not to bring anything and just come.  She wrote back insisting that she wants to bring something.

Here is my email to her ……

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Writing the column for the WSJ (see below) paid off …..

Many of my economist friends have a problem with gift-giving. They view the holidays not as an occasion for joy but as a festival of irrationality, an orgy of wealth-destruction.

Rational economists fixate on a situation in which, say, your Aunt Bertha spends $50 on a shirt for you, and you end up wearing it just once (when she visits). Her hard-earned cash has evaporated, and you don’t even like the present! One much-cited study estimated that as much as a third of the money spent on Christmas is wasted, because recipients assign a value lower than the retail price to the gifts they receive. Rational economists thus make a simple suggestion: Give cash or give nothing.

But behavioral economics, which draws on psychology as well as on economic theory, is much more appreciative of gift giving. Behavioral economics better understands why people (rightly, in my view) don’t want to give up the mystery, excitement and joy of gift giving. In this view, gifts aren’t irrational. It’s just that rational economists have failed to account for their genuine social utility. So let’s examine the rational and irrational reasons to give gifts.

Some gifts, of course, are basically straightforward economic exchanges. This is the case when we buy a nephew a package of socks because his mother says he needs them. It is the least exciting kind of gift but also the one that any economist can understand.

A second important kind of gift is one that tries to create or strengthen a social connection. The classic example is when somebody invites us for dinner and we bring something for the host. It’s not about economic efficiency. It’s a way to express our gratitude and to create a social bond with the host.

Another category of gift, which I like a lot, is what I call “paternalistic” gifts—things you think somebody else should have. I like a certain Green Day album or Julian Barnes novel or the book “Predictably Irrational,” and I think that you should like it, too. Or I think that singing lessons or yoga classes will expand your horizons—and so I buy them for you.

A paternalistic gift ignores the preferences of the person getting the gift, which tends to drive economists crazy, but it may actually change those preferences for the better. Of course, you might mess up by giving a paternalistic gift that someone hates, but that doesn’t mean you shouldn’t try.

A holiday gift can straddle these categories. Instead of picking a book from your sister’s Amazon wish list, or giving her what you think she should read, go to a bookstore and try to think like her. It’s a serious social investment.

The great challenge lies in making the leap into someone else’s mind. Psychological research affirms that we are all partial prisoners of our own preferences and have a hard time seeing the world from a different perspective. But whether or not your sister likes the book, it may give her joy to think about you thinking of her.

My final category of gift is one that somebody really wants but would feel guilty buying for themselves. This category shouldn’t exist, according to standard economic theory: If you really liked it and could afford it, you’d buy it.

For me, fancy pens meet this description. I don’t use pens that much, but I’d be pleased to get a really nifty one (a Porsche 911 would be OK, too). When my students defend their dissertations, I ask everyone on the Ph.D. committee to sign the required forms with an expensive pen, and then I give the pen to the student. It’s a prototypical good gift, because it’s something that they would probably feel guilty about buying for themselves, plus it has positive associations as a memento of the day.

Behavioral economics has one more lesson for gift givers: If your goal is to maximize a social connection, don’t give a perishable gift like flowers or chocolates. True, people enjoy them, and you don’t want to impose by giving something more permanent. But what are you trying to maximize? Is your goal to avoid imposing on them or for them to remember you?

For a durable impression, better to give a vase or a painting. Even if your friends don’t like it that much, they’ll think about you more often (though maybe not in the most positive terms).

Better yet, give a gift that gets used intermittently. A painting often just fades into the attentional background. An electric mixer, when used, gets noticed.

I like to buy people high-end headphones. They get used intermittently, so I can imagine that every time you put them on, you will think of me. Also, they’re a luxury—the kind of thing that people have a hard time buying for themselves. Best of all perhaps, they’re intimate: When I give someone headphones, I can think of myself whispering in their ears.

And maybe, when they use the headphones, they’ll remember you whispering to them or even kissing their ears. Has anyone ever thought of a kiss after you hand them cash?

Happy holidays — Dan

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This post first appeared on WSJ.com

I just posted a new study that should take you about 5 minutes to complete. If you would like to take the survey (and I would appreciate it very much), please look to the right sidebar under “Participate” and click on the “Take a quick anonymous survey” link. Thanks in advance for your help.

Irrationally Yours

One day a few years ago I passed a street teeming with panhandlers, begging for change. And it made me wonder what causes people to stop for beggars and what causes them to walk on by. So I hung out for a while, engaging in a bit of discreet peoplewatching. Many people passed the beggars without giving anything, but there were a few who stopped. What was it that separated those who paused and gave money from those who didn’t? And what separated the more successful beggars from those who were less successful?  Was it something specific about their situation, or their presentation? Was it the beggar’s strategy?

To look into this question, I called on Daniel Berger Jones, an acting student at Boston University who had just finished hiking around Europe. Not having shaved in months and already looking pretty scruffy, he was ready for the job (plus as part of his training to be an actor I figured it would be good for him to learn how to beg for money – at the time he did not see that particular benefit). So I found a street corner and placed him there to take on the panhandling trade. I asked Daniel to try a few different approaches to begging and to keep track of the approaches that made him more or less money. (Of course, after the experiment was over we donated all the money that he made to charity). The general setup was what we call a 2×2 design: When people walked by, Daniel would either be sitting down (the passive approach) or standing up (the active approach) and he would either look them in the eyes or not. So there were times when he was 1) sitting down and looking people in the eyes, 2) sitting down and not looking people in the eyes, 3) standing up and looking people in the eyes, or 4) standing up and not looking people in the eyes.

Daniel got to work, scrounging for money. He stayed on his corner for a while, trying the different approaches. And it turned out that both his position and his eye contact did, in fact, make a difference. He made more money when he was standing and when he looked people in the eyes. It seemed that the most lucrative strategy was to put in more effort, to get people to notice him, and to look them in the eyes so that they could not pretend to not see him.

Interestingly, while the eye contact approach was working in general, it was clear that some of the passersby had a counterstrategy: they were actively shifting their gaze in what seemed to be an attempt to pretend that he wasn’t there. They simply acted as if there was a dark hole in front of them rather than a person, and they were quite successful at averting their gaze.

At some point, something very interesting happened. There was another beggar on the street – a professional beggar – who approached young Daniel and said, “Look kid, you don’t know what you’re doing. Let me teach you.” And so he did. This beggar took our concept of effort and human contact to the next level, walking right up to people and offering his hand up for them to shake. With this dramatic gesture, people had a very hard time refusing him or pretending that they did not seen him. Apparently, the social forces of a handshake are simply too strong and too deeply engrained to resist – and many people gave in and shook his hand. Of course, once they shook his hand, they would also look him in the eyes; the beggar succeeded at breaking the social barrier and was able to get many people to give him money. Once he became a real flesh and blood person with eyes, a smile and needs, people gave in and opened their wallets.  When the beggar left his new pupil, he felt so sorry for poor Daniel –and his panhandling ineptitude– that he actually gave him some money. Of course Daniel tried to refuse, but the beggar insisted.

I think there are two main lessons here. The first is to realize how much of our lives are structured by social norms. We do what we think is right, and if someone gives us a hand, there’s a good chance we will shake it, make eye contact, and act very differently than we would otherwise.

The second lesson is to confront the tendency to avert our eyes when we know that someone is in need.  We realize that if we face the problem, we’ll feel compelled to do something about it, and so we avoid looking and thereby avoid the temptation to give in and help. We know that if we stop for a beggar on the street, we will have a very hard time refusing his plea for help, so we try hard to ignore the hardship in front of us: we want to see, hear, and speak no evil. And if we can pretend that it isn’t there, we can trick ourselves into believing –at least for that moment– that it doesn’t exist.  The good news is that, while it is difficult to stop ignoring the sad things, if we actively chose to pay attention there is a good chance that we will take an action and help a person in need.